CALCULATION AGENCY AGREEMENT
CALCULATION AGENCY AGREEMENT, dated as of February 6, 2004 (the
"Agreement"), between Lehman Brothers Holdings Inc. (the "Company") and Lehman
Brothers Inc., as Calculation Agent.
WHEREAS, the Company proposes to issue and sell its Risk AdjustiNG
Equity Range Securities(SM) (a "Security" and, in the aggregate, the
"Securities") from time to time*;
WHEREAS, the terms of each series of the Securities will be described
in a pricing supplement (each such pricing supplement, a "Pricing Supplement")
and a prospectus supplement, dated January 30, 2004 (the "RANGERS Prospectus
Supplement"), to the prospectus dated June 14, 2001, as supplemented by a
prospectus supplement dated June 14, 2001;
WHEREAS, the Securities will be issued under an Indenture, dated as of
September 1, 1987, between the Company and Citibank, N.A., as Trustee (the
"Trustee"), as supplemented and amended by supplemental indentures dated as of
November 25, 1987, November 27, 1990, September 13, 1991, October 4, 1993,
October 1, 1995, and June 26, 1997, and incorporating Standard Multiple Series
Indenture Provisions dated July 30, 1987, as amended November 16, 1987
(collectively, the "Indenture"); and
WHEREAS, the Company requests the Calculation Agent to perform certain
services described herein in connection with the Securities;
NOW THEREFORE, the Company and the Calculation Agent agree as follows:
1. Appointment of Agent. The Company hereby appoints Lehman Brothers
Inc. as Calculation Agent and Lehman Brothers Inc. hereby accepts such
appointment as the Company's agent for the purpose of performing the services
hereinafter described upon the terms and subject to the conditions hereinafter
mentioned.
2. Calculations and Information Provided. The Calculation Agent shall
determine, with respect to each series of the Securities, (a) the Maturity
Payment Amount, (b) the Settlement Value, (c) the Closing Price of each
Settlement Value Security on the Valuation Date, (d) the Multipliers for each of
the Settlement Value Securities, (e) whether adjustments to the Multipliers or
the Threshold Value should be made and, if so, the timing and the amount of such
adjustments, (f) whether a Market Disruption Event has occurred, (g) if the
Company elects the Stock Settlement Option, the number of shares of the Index
Stock (and of any other equity securities used in the calculation of the
Settlement Value), and the value of any fractional shares thereof, equal to the
Maturity Payment Amount, (h) the Redemption Payment
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* "Risk AdjustiNG Equity Range Securities" and "RANGERS" are service marks
of Lehman Brothers Inc.
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Amount, if applicable, (i) the Optional Repurchase Amount, if applicable, (j)
the amount payable upon repayment of the Securities on any Optional Reset Date,
if applicable and (k) any other calculation determination function and duty
described in the applicable Pricing Supplement as being performed by the
Calculation Agent. The Calculation Agent shall notify the Trustee of all such
determinations and any such adjustment or if a Market Disruption Event with
respect to a series of Securities has occurred. Annex A hereto sets forth the
procedures the Calculation Agent will use to determine the information described
in this Section 2 with respect to a series of Securities.
3. Calculations. Any calculation or determination by the Calculation
Agent pursuant hereto shall (in the absence of manifest error) be final and
binding. Any calculation made by the Calculation Agent hereunder shall, at the
Trustee's request, be made available at the Corporate Trust Office.
4. Fees and Expenses. The Calculation Agent shall be entitled to
reasonable compensation for all services rendered by it as agreed to between the
Calculation Agent and the Company.
5. Terms and Conditions. The Calculation Agent accepts its obligations
herein set out upon the terms and conditions hereof, including the following, to
all of which the Company agrees:
(a) in acting under this Agreement, the Calculation Agent is acting
solely as an independent expert of the Company and does not assume any
obligation toward, or any relationship of agency or trust for or with, any
of the holders of the Securities;
(b) unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the
Company or the Trustee made or given under any provision of this Agreement
shall be sufficient if signed by any person who the Calculation Agent
reasonably believes to be a duly authorized officer or attorney-in-fact of
the Company or the Trustee, as the case may be;
(c) the Calculation Agent shall be obliged to perform only such duties
as are set out specifically herein and any duties necessarily incidental
thereto;
(d) the Calculation Agent, whether acting for itself or in any other
capacity, may become the owner or pledgee of Securities with the same rights
as it would have had if it were not acting hereunder as Calculation Agent;
and
(e) the Calculation Agent shall incur no liability hereunder except for
loss sustained by reason of its gross negligence or wilful misconduct.
6. Resignation; Removal; Successor. (a) The Calculation Agent may at
any time resign by giving written notice to the Company of such intention on its
part, specifying the date on which its desired resignation shall become
effective, subject to the appointment of a successor Calculation Agent and
acceptance of such appointment by such successor Calculation Agent, as
hereinafter provided. The Calculation Agent hereunder may be removed at any time
by the filing with it of an instrument in writing signed by or on behalf of the
Company and
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specifying such removal and the date when it shall become effective. Such
resignation or removal shall take effect upon the appointment by the Company, as
hereinafter provided, of a successor Calculation Agent and the acceptance of
such appointment by such successor Calculation Agent. In the event a successor
Calculation Agent has not been appointed and has not accepted its duties within
90 days of the Calculation Agent's notice of resignation, the Calculation Agent
may apply to any court of competent jurisdiction for the designation of a
successor Calculation Agent.
(b) In case at any time the Calculation Agent shall resign, or shall be
removed, or shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or make an assignment for the benefit of its creditors or consent to
the appointment of a receiver or custodian of all or any substantial part of its
property, or shall admit in writing its inability to pay or meet its debts as
they mature, or if a receiver or custodian of it or all or any substantial part
of its property shall be appointed, or if any public officer shall have taken
charge or control of the Calculation Agent or of its property or affairs, for
the purpose of rehabilitation, conservation or liquidation, a successor
Calculation Agent shall be appointed by the Company by an instrument in writing,
filed with the successor Calculation Agent. Upon the appointment as aforesaid of
a successor Calculation Agent and acceptance by the latter of such appointment,
the Calculation Agent so superseded shall cease to be Calculation Agent
hereunder.
(c) Any successor Calculation Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor, to the Company and to the Trustee an
instrument accepting such appointment hereunder and agreeing to be bound by the
terms hereof, and thereupon such successor Calculation Agent, without any
further act, deed or conveyance, shall become vested with all the authority,
rights, powers, trusts, immunities, duties and obligations of such predecessor
with like effect as if originally named as Calculation Agent hereunder, and such
predecessor, upon payment of its charges and disbursements then unpaid, shall
thereupon become obligated to transfer, deliver and pay over, and such successor
Calculation Agent shall be entitled to receive, all moneys, securities and other
property on deposit with or held by such predecessor, as Calculation Agent
hereunder.
(d) Any corporation into which the Calculation Agent hereunder may be
merged or converted or any corporation with which the Calculation Agent may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Calculation Agent shall be a party, or any
corporation to which the Calculation Agent shall sell or otherwise transfer all
or substantially all of the assets and business of the Calculation Agent shall
be the successor Calculation Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
7. Certain Definitions. Terms not otherwise defined herein or in Annex
A hereto are used herein as defined in the Indenture or the Securities.
8. Indemnification. The Company will indemnify the Calculation Agent
against any losses or liability which it may incur or sustain in connection with
its appointment or the exercise of its powers and duties hereunder except such
as may result from the gross negligence or wilful misconduct of the Calculation
Agent or any of its agents or employees. The Calculation Agent shall incur no
liability and shall be indemnified and held harmless by the
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Company for or in respect of any action taken or suffered to be taken in good
faith by the Calculation Agent in reliance upon written instructions from the
Company.
9. Notices. Any notice required to be given hereunder shall be
delivered in person, sent (unless otherwise specified in this Agreement) by
letter, telex or facsimile transmission or communicated by telephone (confirmed
in a writing dispatched within two Business Days), (a) in the case of the
Company, to it at 745 Seventh Avenue, New York, New York 10019 (facsimile: (646)
758-3204) (telephone: (212) 526-7000), Attention: Treasurer, with a copy to 399
Park Avenue, New York, New York 10022 (facsimile: (212) 526-0357) (telephone:
(212) 526-7000), Attention: Corporate Secretary, (b) in the case of the
Calculation Agent, to it at 745 Seventh Avenue, New York, New York 10019
(facsimile: (646) 758-4942) (telephone: (212) 526-7000), Attention: Equity
Derivatives Trading and (c) in the case of the Trustee, to it at 111 Wall
Street, 5th Floor, New York, New York 10043 (facsimile: (212) 657-3836)
(telephone: (212) 657-7805), Attention: Corporate Trust Department or, in any
case, to any other address or number of which the party receiving notice shall
have notified the party giving such notice in writing. Any notice hereunder
given by telex, facsimile or letter shall be deemed to be served when in the
ordinary course of transmission or post, as the case may be, it would be
received.
10. Governing Law. This Agreement shall be governed by and continued in
accordance with the laws of the State of New York.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
12. Benefit of Agreement. This Agreement is solely for the benefit of
the parties hereto and their successors and assigns, and no other person shall
acquire or have any rights under or by virtue hereof.
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IN WITNESS WHEREOF, this Agreement has been entered into as of the day
and year first above written.
LEHMAN BROTHERS HOLDINGS INC.
By: ___________________________
Name:
Title:
LEHMAN BROTHERS INC.,
as Calculation Agent
By: __________________________
Name:
Title:
ANNEX A
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The following are the procedures that the Calculation Agent will use to
determine the information described in Section 2 of the Calculation Agency
Agreement with respect to a series of the Securities. The procedures (and
related definitions) relating to the redemption or repurchase of Securities are
only applicable to the extent the relevant Pricing Supplement provides for the
redemption or repurchase of the Securities described therein.
1. Settlement Value Securities.
The "Settlement Value Securities" shall mean the securities included
in the calculation of the Settlement Value from time to time and shall initially
be the Index Stock specified in the relevant Pricing Supplement, unless adjusted
for certain extraordinary corporate events as described herein.
2. Determination of the Maturity Payment Amount.
The Calculation Agent shall determine the Payment Amount payable for
each Security.
The amount payable on the Maturity Date for the Securities (the
"Maturity Payment Amount") shall equal per $1,000 Security, (i) (a) $1,000, or
(b) if the value of the Index Stock falls below the Threshold Value at any time
during the Measurement Period, the lesser of (1) $1,000, and (2) the Alternative
Redemption Amount; and (ii) any accrued but unpaid coupon payments through but
excluding the Maturity Date. The amount payable upon a Redemption of each
Security (the "Redemption Payment Amount") shall equal (i) the amount that would
be the Maturity Payment Amount, but with the Settlement Value calculated as if
the date the Redemption Notice is given was the Valuation Date and (ii) any
accrued but unpaid interest through but excluding the Non-Delaying Event
Redemption Date or, if a Delaying Event occurs, through the Delaying Event
Redemption Date. The amount payable upon a Repurchase of each Security (the
"Optional Repurchase Payment Amount") shall equal (i) the amount that would be
the Maturity Payment Amount, but with the Settlement Value calculated as if the
date that is a number of Business Days equal to the Determination Period before
the Non-Delaying Event Repurchase Date was the Valuation Date and (ii) any
accrued but unpaid interest through the Non-Delaying Event Repurchase Date or,
if a Delaying Event occurs, through but excluding the Delaying Event Repurchase
Date.
3. Multipliers.
"Multiplier" shall mean, with respect to each Settlement Value
Security, the number of shares or other units (including any fractional share or
other unit expressed as a decimal) of the Settlement Value Security included in
the calculation of the Settlement Value. The initial Multiplier relating to the
Index Stock Issuer, initially the only Settlement Value Security, shall be 1.0,
unless otherwise specified in the relevant Pricing Supplement. The initial
Multiplier for any other security which may subsequently become a Settlement
Value Security shall be the number of shares or other units of such security
which are to be included in the calculation of the Settlement Value at the time
the security becomes a Settlement Value Security. The Multiplier with respect to
any Settlement Value Security shall remain constant unless adjusted for certain
extraordinary corporate events as described below.
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4. Adjustments to the Multipliers and the Settlement Value Securities.
Adjustments to a Multiplier and the Settlement Value Securities
shall be made in the circumstances described below. For purposes of these
adjustments, except as noted below, ADRs are treated like Settlement Value
Securities if a comparable adjustment to the foreign shares underlying the ADRs
is made pursuant to the terms of the depositary arrangement for the ADRs or if
holders of ADRs are entitled to receive property in respect of the underlying
foreign shares.
o If a Settlement Value Security is subject to a stock split or reverse
stock split, then once the split has become effective, the Multiplier
relating to such Settlement Value Security shall be adjusted. The
Multiplier shall be adjusted to equal the product of the number of shares
outstanding of the Settlement Value Security after the split with respect
to each share of such Settlement Value Security immediately prior to
effectiveness of the split and the prior Multiplier.
o If a Settlement Value Security is subject to an extraordinary stock
dividend or extraordinary stock distribution that is given equally to all
holders of shares, then once the Settlement Value Security is trading
ex-dividend, the Multiplier for such Settlement Value Security shall be
increased by the product of the number of shares of such Settlement Value
Security issued with respect to one share of such Settlement Value
Security and the prior Multiplier.
o If the issuer of a Settlement Value Security, or if a Settlement Value
Security is an ADR, the foreign issuer of the underlying foreign share,
is being liquidated or dissolved or is subject to a proceeding under any
applicable bankruptcy, insolvency or other similar law, such Settlement
Value Security shall continue to be included in the calculation of the
Settlement Value so long as the primary exchange, quotation system or
market is reporting a market price for the Settlement Value Security. If
a market price, including a price on a bulletin board service, is no
longer available for a Settlement Value Security, then the value of the
Settlement Value Security shall equal zero for so long as no market price
is available, and no attempt shall be made to find a replacement stock or
increase the Settlement Value to compensate for the deletion of such
Settlement Value Security.
o If the issuer of a Settlement Value Security, or if a Settlement Value
Security is an ADR, the foreign issuer of the underlying foreign share,
has been subject to a merger or consolidation and is not the surviving
entity and holders of the Settlement Value Security are entitled to
receive cash, securities, other property or a combination thereof in
exchange for the Settlement Value Security, then the following shall be
included as "Settlement Property":
o To the extent cash is received, the Settlement Property shall
include an amount of cash equal to the product of (1) the cash
consideration per share of Settlement Value Security, (2) the
Multiplier for the Settlement Value Security and (3) the number of
Securities outstanding, each determined as of the time the holders
of the Settlement Value Security are entitled to receive the cash
consideration (the "M&A Cash Component"), plus accrued interest. If
the cash received is denominated in a foreign currency, such cash
shall then be converted into U.S. dollars using the Official W.M.
Reuters Spot Closing Rate at 11:00 a.m., New
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York City time. If there are several quotes for the Official W.M.
Reuters Spot Closing Rate at that time, the first quoted rate
starting at 11:00 a.m. shall be the rate used. If there is no such
Official W.M. Reuters Spot Closing Rate for a country's currency at
11:00 a.m., New York City time, the foreign currency-denominated
cash shall be converted into U.S. dollars using the last available
U.S. dollar cross-rate quote before 11:00 a.m., New York City time.
Interest shall accrue beginning the first London Business Day after
the day that holders of the Settlement Value Security receive the
cash consideration until the Stated Maturity Date (the "M&A Cash
Component Interest Accrual Period"). Interest shall accrue on the
M&A Cash Component at a rate equal to the London Interbank Offered
Rate ("LIBOR") with a term corresponding to the M&A Cash Component
Interest Accrual Period.
o To the extent that equity securities that are traded or listed on
an exchange, quotation system or market are received, once the
exchange for the new securities has become effective, the former
Settlement Value Security shall be removed from the calculation of
the Settlement Value and the Settlement Property will include a
number of shares of the new security per outstanding Security equal
to the Multiplier for the new security as a new Settlement Value
Security. The Multiplier for the new Settlement Value Security
shall equal the product of the last value of the Multiplier of the
original Settlement Value Security and the number of securities of
the new Settlement Value Security exchanged with respect to one
share of the original Settlement Value Security.
o To the extent that equity securities that are not traded or listed
on an exchange, quotation system or market or non-equity securities
or other property (other than cash) is received, the Calculation
Agent shall determine the "Fair Market Value" of the securities or
other property received per share of Settlement Value Security
based on the Average Execution Price. The Settlement Property shall
include an amount of cash equal to the product of (1) the Fair
Market Value per share of Settlement Value Security, (2) the
Multiplier for the Settlement Value Security and (3) the number of
Securities outstanding (the "M&A Sale Component"). The Multiplier
and the number of Securities outstanding will be determined as of
the time holders of the Settlement Value Security are entitled to
receive the securities or other property. The Settlement Value
shall also include accrued interest on the M&A Sale Component.
Interest shall accrue beginning the first London Business Day after
the day that an affiliate of Holdings sells the securities or other
property used to hedge Holdings' obligations under the Securities
until the Stated Maturity Date (the "M&A Sale Component Interest
Accrual Period"). Interest shall accrue at a rate equal to LIBOR
with a term corresponding to the M&A Sale Component Interest
Accrual Period.
o If all of the shares of a Settlement Value Security of an issuer are
converted into or exchanged for the same or a different number of shares
of any class or classes of common stock other than such Settlement Value
Security, whether by capital reorganization, recapitalization or
reclassification or otherwise, then, once the conversion has become
effective, the former Settlement Value Security shall be removed from the
calculation of the Settlement Value and the Settlement Property will
include a number of shares of the new common stock per outstanding
Security equal to the Multiplier for the new common
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stock as a new Settlement Value Security. The Multiplier for each new
Settlement Value Security shall equal the product of the last value of
the Multiplier of the original Settlement Value Security and the number
of shares of the new Settlement Value Security issued with respect to one
share of the original Settlement Value Security.
o If the issuer of a Settlement Value Security, or if a Settlement Value
Security is an ADR, the issuer of the underlying foreign share, issues to
all of its shareholders common stock or another equity security that is
traded or listed on an exchange, quotation system or market of an issuer
other than itself, then the Settlement Property shall include a number of
shares of the new common stock per outstanding Security equal to the
Multiplier for the new common stock or other equity security as a new
Settlement Value Security. The Multiplier for the new Settlement Value
Security shall equal the product of the last value of the Multiplier with
respect to the original Settlement Value Security and the number of
shares of the new Settlement Value Security with respect to one share of
the original Settlement Value Security.
o If an ADR is no longer listed or admitted to trading on a United States
securities exchange registered under the Securities Exchange Act of 1934
or is no longer a security quoted on The Nasdaq Stock Market, then the
ADR shall be removed from the calculation of the Settlement Value, the
foreign share underlying the ADR shall be deemed to be a new common stock
and the Settlement Property shall include a number of shares of new
common stock per outstanding Security equal to the Multiplier for the new
common stock as a new Settlement Value Security. The initial Multiplier
for that new Settlement Value Security shall equal the product of the
last value of the Multiplier with respect to the original ADR and the
number of underlying foreign shares represented by a single such ADR.
o If a Settlement Value Security is subject to an extraordinary dividend or
an extraordinary distribution, including upon liquidation or dissolution,
of cash, equity securities that are not traded or listed on an exchange,
quotation system or market, non-equity securities or other property of
any kind which is received equally by all holders of such Settlement
Value Security, then the Settlement Property shall include the following:
o To the extent cash is entitled to be received, the Settlement
Property shall include on each day after the time that the
Settlement Value Security trades ex-dividend until the date the
cash consideration is entitled to be received, the present value of
the cash to be received per share of Settlement Value Security
multiplied by the Multiplier for the Settlement Value Security on
such day and by the number of Securities outstanding on such day,
discounted at a rate equal to LIBOR, with a term beginning that day
and ending on the date that the cash is entitled to be received
(the "PV Extraordinary Cash Component"). When the cash
consideration is received, the PV Extraordinary Cash Component
shall be deleted from the Settlement Value and the Settlement
Property shall include an amount of cash equal to the product of
(1) the cash consideration per share of Settlement Value Security,
(2) the Multiplier for the Settlement Value Security and (3) the
number of Securities outstanding, each determined as of the time
the holders of the Settlement Value Security are entitled to
receive the cash consideration (the "Extraordinary Cash
Component"), plus accrued interest. If the cash consideration
received or entitled to be received is denominated in a foreign
currency, such cash
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or the present value of such cash, as the case may be, shall be
converted into U.S. dollars using the Official W.M. Reuters Spot
Closing Rate at 11:00 a.m., New York City time. If there are
several quotes for the Official W.M. Reuters Spot Closing Rate at
that time, the first quoted rate starting at 11:00 a.m. shall be
the rate used. If there is no such Official W.M. Reuters Spot
Closing Rate for a country's currency at 11:00 a.m., New York City
time, the foreign currency-denominated cash shall be converted into
U.S. dollars using the last available U.S. dollar cross-rate quote
before 11:00 a.m., New York City time. Interest shall accrue on the
Extraordinary Cash Component beginning the first London Business
Day after the day that holders of the Settlement Value Security are
entitled to receive the Extraordinary Cash Component until the
Stated Maturity Date (the "Extraordinary Cash Component Interest
Accrual Period"). Interest shall accrue at a rate equal to LIBOR
with a term corresponding to the Extraordinary Cash Component
Interest Accrual Period.
o To the extent that equity securities that are not traded or listed
on an exchange, quotation system or market or non-equity securities
or other property (other than cash) is received, the Calculation
Agent shall determine the Fair Market Value of the securities or
other property received per share of Settlement Value Security
based on the Average Execution Price and the Settlement Property
shall include an amount of cash equal to the product of (1) the
Fair Market Value per share of Settlement Value Security , (2) the
Multiplier for the Settlement Value Security and (3) the number of
Securities outstanding (the "Extraordinary Sale Component"). The
Multiplier and the number of Securities outstanding will be
determined as of the time the holders of the Settlement Value
Security are entitled to receive the securities or other property.
The Settlement Property shall also include accrued interest on the
Extraordinary Sale Component. Interest shall accrue beginning the
first London Business Day after the day that an affiliate of
Holdings sells the securities or other property used to hedge
Holdings' obligations under the Securities until the Stated
Maturity Date (the "Extraordinary Sale Component Interest Accrual
Period"). Interest shall accrue at a rate equal to LIBOR with a
term corresponding to the Extraordinary Sale Component Interest
Accrual Period.
o If similar corporate events occur with respect to the issuer of an equity
security other than a Settlement Value Security, adjustments similar to
the above will be made for that equity security. In addition, if any
other corporate events occur with respect to the issuer of a Settlement
Value Security, adjustments will be made to reflect the economic
substance of such events.
Unless otherwise specified in the relevant Pricing Supplement, the payment of an
ordinary cash dividend by an issuer of a Settlement Value Security, or if a
Settlement Value Security is an ADR, by a foreign issuer of the underlying
foreign share, from current income or retained earnings shall not result in an
adjustment to the Multiplier.
No adjustments of any Multiplier of a Settlement Value Security shall be
required unless the adjustment would result in a change of at least .1% (.001)
in the Multiplier then in effect. Adjustments which result in a change of less
than .1% (.001) shall be carried forward and
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included in the next adjustment, if any. The Multiplier resulting from any of
the adjustments specified above shall be rounded at the Calculation Agent's
discretion.
5. Definitions.
Set forth below are the terms used in the Agreement and in this
Annex A.
"ADR" shall mean American Depositary Receipt.
"Alternative Redemption Amount" shall equal, for each $1,000
Security, the product of (a) $1,000 and (b) the Settlement Value divided by the
Initial Value.
"AMEX" shall mean the American Stock Exchange LLC.
"Average Execution Price" shall mean, for a security or other
property, the average execution price that an affiliate of the Company receives
or pays for such security or property, as the case may be, to hedge the
Company's obligations under the Securities.
"Business Day", notwithstanding any provision in the Indenture,
shall mean any day that is not a Saturday, a Sunday or a day on which the NYSE,
Nasdaq or AMEX is not open for trading or banking institutions or trust
companies in the City of New York are authorized or obligated by law or
executive order to close, and, (a) if the Specified Currency is a Foreign
Currency other than Euros, not a day on which banking institutions are
authorized or required by law to close in the Principal Financial Center of the
country issuing the Foreign Currency and (b) if the Specified Currency is Euros,
a day on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer System is open. "Principal Financial Center" shall mean the capital
city of the country issuing the specified currency. However, for U.S. dollars,
Australian dollars, Canadian dollars and Swiss francs, the Principal Financial
Center will be New York City, Sydney, Toronto and Zurich, respectively.
"Calculation Agent" shall mean the person that has entered into an
agreement with the Company providing for, among other things, the determination
of the Settlement Value and the Payment Amount, which term shall, unless the
context otherwise requires, include its successors and assigns. The initial
Calculation Agent shall be Lehman Brothers Inc.
"Calculation Day" shall mean (a) for payment at the Stated Maturity
Date, the Valuation Date, (b) for a payment upon a Repurchase, the date which is
the number of Business Days equal to the Determination Period before the
Non-Delaying Event Repurchase Date or (c) for payment upon a Redemption, the
date the Redemption Notice is given in accordance with the Indenture.
"Close of Trading" shall mean, in respect of any primary exchange or
quotation system, the scheduled weekday closing time on a day on which the
primary exchange or quotation system is scheduled to be open for trading for its
respective regular trading session, without regard to after hours or any other
trading outside of the regular trading session hours.
"Closing Price" shall mean, for each Settlement Value Security, as
determined by the Calculation Agent based on information reasonably available to
it:
(i) If the Settlement Value Security is listed on a United States
national securities exchange or quotation system or is a security quoted
on Nasdaq, the last
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reported sale price per share at the Close of Trading, regular way, on
such day, on the primary securities exchange registered under the
Securities Exchange Act of 1934 on which such Settlement Value Security is
listed or admitted to trading or on Nasdaq, as the case may be.
(ii) If the Settlement Value Security is listed or quoted on a
non-United States securities exchange, quotation system (other than a
bulletin board) or market, the last reported sale price at the Close of
Trading, regular way, on such day, on the primary exchange, quotation
system or market on which such Settlement Value Security is listed or
admitted to trading, as the case may be. The Closing Price per share shall
then be converted into U.S. dollars using the Official W.M. Reuters Spot
Closing Rate at 11:00 a.m., New York City time. If there are several
quotes for the Official W.M. Reuters Spot Closing Rate at that time, the
first quoted rate starting at 11:00 a.m. shall be the rate used. If there
is no such Official W.M. Reuters Spot Closing Rate for a country's
currency at 11:00 a.m., New York City time, the Closing Price shall be
converted into U.S. dollars using the last available U.S. dollar
cross-rate quote before 11:00 a.m., New York City time.
(iii) If the Settlement Value Security is not listed on a national
securities exchange or quotation system or is not a Nasdaq security, and
is listed or traded on a bulletin board, the Average Execution Price per
share of the Settlement Value Security. If such Settlement Value Security
is listed or traded on a non-United States bulletin board, the Closing
Price will then be converted into U.S. dollars using the Official W.M.
Reuters Spot Closing Rate at 11:00 a.m., New York City time. If there are
several quotes for the Official W.M. Reuters Spot Closing Rate at that
time, the first quoted rate starting at 11:00 a.m. shall be the rate used.
If there is no such Official W.M. Reuters Spot Closing Rate for a
country's currency at 11:00 a.m., New York City time, the Closing Price
shall be converted into U.S. dollars using the last available U.S. dollar
cross-rate quote before 11:00 a.m., New York City time.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Delaying Event" shall mean a Market Disruption Event for a
Settlement Value Security which occurs on the relevant Calculation Day.
"Delaying Event Redemption Date" shall mean, if a Delaying Event
occurs on the Calculation Day for a Redemption, the later of (a) the
Non-Delaying Event Redemption Date and (b) the number of Business Days equal to
the Determination Period after the Payment Determination Date thereof.
"Delaying Event Repurchase Date" shall mean, if a Delaying Event
occurs on the Calculation Day for a Repurchase, the number of Business Days
equal to the Determination Period after the Payment Determination Date thereof.
"Determination Period" shall have the meaning specified in the
relevant Pricing Supplement.
"Ending Multiplier" shall mean, for each Settlement Value Security,
the initial Multiplier for such Settlement Value Security adjusted from time to
time for the occurrence,
8
prior to the Close of Trading on the relevant Calculation Day, of any of the
extraordinary corporate transactions described in Section 4 of this Annex A.
"Indenture" shall have the meaning set forth in the preamble to this
Agreement.
"Index Stock" shall have the meaning specified in the relevant
Pricing Supplement.
"Index Stock Issuer" shall have the meaning specified in the
relevant Pricing Supplement.
"Initial Value" shall have the meaning specified in the relevant
Pricing Supplement.
"LIBOR" shall mean London Interbank Offered Rate.
"London Business Day" shall mean any day in the United Kingdom that
is a Saturday, a Sunday or a day on which the London Stock Exchange is not open
for trading or banking institutions or trust companies in the City of London are
authorized or obligated by law or parliamentary order to close.
"Market Disruption Event", unless indicated otherwise in the
relevant Pricing Supplement, with respect to a Settlement Value Security shall
mean any of the following events has occurred on any day as determined by the
Calculation Agent:
(1) A material suspension of or limitation imposed on trading
relating to such Settlement Value Security by the Relevant Exchange, at
any time during the one-hour period that ends at the Close of Trading on
such day, whether by reason of movements in price exceeding limits
permitted by that primary exchange or quotation system or otherwise.
Limitations on trading during significant market fluctuations imposed
pursuant to NYSE Rule 80B or any applicable rule or regulation enacted or
promulgated by the NYSE, any other exchange, quotation system or market,
any other self regulatory organization or the Securities and Exchange
Commission of similar scope or as a replacement for Rule 80B may be
considered material.
(2) A material suspension of or limitation imposed on trading in
futures or options contracts relating to such Settlement Value Security by
the primary exchange or quotation system on which those futures or options
contracts are traded, at any time during the one-hour period that ends at
the Close of Trading on such day, whether by reason of movements in price
exceeding limits permitted by that primary exchange or quotation system or
otherwise.
(3) Any event, other than an early closure, that disrupts or impairs
the ability of market participants in general to effect transactions in,
or obtain market values for, that Settlement Value Security on the primary
U.S. exchange or quotation system on which that Settlement Value Security
is traded, or in the case of a Settlement Value Security not listed or
quoted in the United States, on the primary exchange, quotation system or
market for such Settlement Value Security, at any time during the one hour
period that ends at the Close of Trading on such day.
9
(4) Any event, other than an early closure, that disrupts or impairs
the ability of market participants in general to effect transactions in,
or obtain market values for, the futures or options contracts relating to
such Settlement Value Security on the primary exchange or quotation system
on which those futures or options contracts are traded at any time during
the one hour period that ends at the Close of Trading on such day.
(5) The closure of the primary exchange or quotation system on which
that Settlement Value Security is traded or on which futures or options
contracts relating to that Settlement Value Security are traded prior to
its scheduled closing time unless the earlier closing time is announced by
the primary exchange or quotation system at least one hour prior to the
earlier of (i) the actual closing time for the regular trading session on
the primary exchange or quotation system and (ii) the submission deadline
for orders to be entered into the primary exchange or quotation system for
execution at the Close of Trading on such day.
(6) The Company, or any of its affiliates, is unable, after using
commercially reasonable efforts to unwind or dispose of, or realize,
recover or remit the proceeds of, any transactions or assets it deems
necessary to hedge the equity price risk of entering into and performing
its obligations with respect to the Securities.
"Maturity Date" shall mean the Stated Maturity Date (except as
otherwise provided in the case of an extendible security or a renewable
security); provided, that if a Market Disruption Event with respect to one or
more of the Settlement Value Securities occurs on the Calculation Day, or if the
Calculation Day is not a Scheduled Trading Day, then the Maturity Date shall be
postponed by a number of Business Days equal to the Determination Period after
the date on which the Settlement Value is finally determined. In the event of
any optional redemption by the Company, any repayment at the option of the
Holder, acceleration of the maturity of this Note or other prepayment of this
Note prior to the Maturity Date specified above, the term "Maturity" when used
herein shall refer, where applicable, to the date of redemption, repayment,
acceleration or other prepayment of this Note.
"Maturity Payment Amount" shall have the meaning set forth in
Section 2 of this Annex A.
"Measurement Period" shall mean the period from the date of the
relevant Pricing Supplement to and including the relevant Valuation Date.
"Multiplier" shall have the meaning set forth in Section 3 of this
Annex A.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"Non-Delaying Event Redemption Date" shall mean the date set forth
in the Redemption Notice, which date shall not be less than 30 nor more than 60
days after the date of the Redemption Notice, unless otherwise specified in the
relevant Pricing Supplement.
"Non-Delaying Event Repurchase Date" shall mean the date which is
the number of Business Days equal to the Optional Repurchase Notice Period
following the Business Day on which the Company receives notice of an Optional
Repurchase from a Holder.
"NYSE" shall mean The New York Stock Exchange, Inc.
10
"Official W.M. Reuters Spot Closing Rate" shall mean the closing
spot rate published on Reuters page "WMRA" relevant for a Settlement Value
Security.
"Optional Repurchase Notice Period" shall mean eight Business Days,
unless otherwise specified in the relevant Pricing Supplement.
"Optional Repurchase Payment Amount" shall have the meaning set
forth in Section 2 of this Annex A.
"Optional Reset Date" shall have the meaning specified in the
relevant Pricing Supplement.
"Payment Amount" shall mean the Maturity Payment Amount, the
Redemption Payment Amount, if applicable, or the Optional Repurchase Payment
Amount, if applicable, as the case may be.
"Payment Determination Date" shall mean the relevant Calculation
Day, unless a Delaying Event occurs with respect to such Payment Determination
Date, in which case the first Business Day after the Calculation Day on which
the Closing Prices for all Settlement Value Securities that have been subject to
a Delaying Event have been determined.
"Pricing Supplement" shall mean the pricing supplement issued by the
Company relating to the series of the Securities.
"Redemption" shall mean, if or unless otherwise specified in the
relevant Pricing Supplement, the option of the Company to redeem, at any time on
or after the date specified in the relevant Pricing Supplement, in whole or from
time to time in part, the Securities.
"Redemption Notice" shall mean the notice of Redemption mailed to
the Holders, as described in the relevant Pricing Supplement.
"Redemption Payment Amount" shall have the meaning set forth in
Section 2 of this Annex A.
"Redemption Amount" shall have the meaning specified in the relevant
Pricing Supplement.
"Relevant Exchange" shall mean for each Settlement Value Security,
the primary United States national securities exchange, quotation system,
including any bulletin board service, or market on which such Settlement Value
Security is traded, or in case such Settlement Value Security is not listed or
quoted in the United States, the primary exchange, quotation system or market
for such Settlement Value Security.
"Repurchase" shall mean, if or unless otherwise specified in the
relevant Pricing Supplement, the option of a holder to elect to require the
Company to repurchase, at any time until the earlier of (a) the date the Company
gives the Redemption Notice or (b) the date which is the number of Business Days
equal to the Optional Repurchase Notice Period before the Stated Maturity Date,
in whole or from time to time in part, such holder's Securities.
"Scheduled Trading Day" shall mean any day on which each Relevant
Exchange is scheduled to be open for trading for its respective regular trading
session.
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"Settlement Property" shall mean the property described in Section 4
of this Annex A.
"Settlement Value" shall mean the sum of (a) the products of the
Closing Prices and the applicable Ending Multipliers for each Settlement Value
Security on the Calculation Day and (b) any cash included in the Settlement
Value on the Calculation Day; provided, that if a Market Disruption Event occurs
on the Calculation Day, the Settlement Value will be determined based on (i)
with respect to Settlement Value Securities that have not been subject to a
Market Disruption Event, the Closing Price of each such Settlement Value
Security on the postponed Calculation Day, and (ii) with respect to Settlement
Value Securities that have been subject to a Market Disruption Event, the
Average Execution Price on the postponed Calculation Day. The Settlement Value
used to calculate the Maturity Payment Amount shall be determined by the
Calculation Agent.
"Settlement Value Securities" shall have the meaning set forth in
Section 1 of this Annex A.
"Stated Maturity Date" shall mean the date specified as such in the
relevant Pricing Supplement.
"Stock Settlement Option" shall mean the Company's option,
exercisable in its sole discretion with not less than 15 days' notice to the
Trustee and the registered holders of the Securities, to pay the Maturity
Payment Amount or the Redemption Payment Amount, if applicable, or the Optional
Repurchase Payment Amount, if applicable, in shares of the Index Stock (and any
other equity securities used in the calculation of the Settlement Value), rather
than in cash.
"Threshold Value" shall have the meaning specified in the relevant
Pricing Supplement, as it may be adjusted from time to time by the Calculation
Agent, to reflect stock splits, extraordinary distributions, liquidations,
mergers, consolidations or similar events involving or relating to any
Settlement Value Security. Such adjustment shall, to the extent the Calculation
Agent believes appropriate, be made in a manner consistent with the adjustments
to the Multipliers and the Settlement Value Securities described in Section 4 of
this Annex A.
"Trustee" shall have the meaning set forth in the preamble to this
Agreement.
"Valuation Date" shall mean the date specified as such in the
relevant Pricing Supplement; provided that if a Market Disruption Event occurs
on such date, the Valuation Date shall be the next Scheduled Trading Day on
which no Market Disruption Event occurs.